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A Note on First-Price Sealed-Bid Cattle Auctions in the Presence of Captive Supplies

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  • Crespi, John M.
  • Xia, Tian

Abstract

The authors present an analytical model of a ϐirst-price sealed-bid cattle auction in which a spot and coordinated markets are interconnected. The model reveals that the conventional wisdom that market coordination negatively affects the bid price in the spot market is an oversimpliϐication. The relationships between key market variables impact bids and bid shading in complex ways. While captive supplies can lead to lower spot prices, the price reductions do not necessarily stem from an increase in market power due to contracting. The model emphasizes the importance of several variables for future empirical studies.

Suggested Citation

  • Crespi, John M. & Xia, Tian, 2015. "A Note on First-Price Sealed-Bid Cattle Auctions in the Presence of Captive Supplies," ISU General Staff Papers 201512010800001504, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201512010800001504
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    References listed on IDEAS

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    1. Tian Xia & Richard J. Sexton, 2004. "The Competitive Implications of Top-of-the-Market and Related Contract-Pricing Clauses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 124-138.
    2. John M. Crespi & Tina L. Saitone & Richard J. Sexton, 2012. "Competition in U.S. Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(4), pages 669-695.
    3. Richard T. Rogers & Richard J. Sexton, 1994. "Assessing the Importance of Oligopsony Power in Agricultural Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(5), pages 1143-1150.
    4. John M. Crespi & Richard J. Sexton, 2004. "Bidding for Cattle in the Texas Panhandle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 660-674.
    5. Menezes, Flavio M., 2008. "An Introduction to Auction Theory," OUP Catalogue, Oxford University Press, number 9780199275991.
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    Cited by:

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    2. McKendree, Melissa G. S. & Saitone, Tina L. & Schaefer, K Aleks, 2020. "Cattle Cycle Dynamics in a Modern Agricultural Market: Competition in Holstein Cattle Procurement," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304380, Agricultural and Applied Economics Association.
    3. Melissa G.S. McKendree & Tina L. Saitone & K. Aleks Schaefer, 2021. "Oligopsonistic Input Substitution in a Thin Market," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1414-1432, August.

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